Short Guide
to Bankruptcy Laws
Page 1
Bankrutpcy is a legal
procedure in a federal court to relieve
certain debts of a person or a business
that is no longer able to pay its debts.
Private individuals have two main options
when declaring bankruptcy:
Chapter 7 –
A trustee is appointed to take
over your property. Any property
of value will be sold or turned
into money to pay your creditors.
You may be able to keep some
personal items and possibly real
estate depending on the law of
the State where you live and
applicable federal laws. If
successful, you will be
discharged from your debts in
about 90 days.
Chapter 13 –
You can usually keep your
property, but you must earn wages
or have some other source of
regular income and you must agree
to pay part of your income to
your creditors. The court must
approve your repayment plan and
your budget. A trustee is
appointed and will collect the
payments from you, pay your
creditors, and make sure you live
up to the terms of your repayment
plan. If successful, you can
expect to be discharged from your
debts in 3 years or 5 years,
depending on your payment plan.
Chapter 12 –
Like chapter 13, but it is only
for family farmers and family
fishermen.
Chapter 11 –
This is used mostly by
businesses. In chapter 11, you
may continue to operate your
business, but your creditors and
the court must approve a plan to
repay your debts. There is no
trustee unless the judge decides
that one is necessary; if a
trustee is appointed, the trustee
takes control of your business
and property.
This Short Guide
focuses on Chapter 7 and 13.
One of the reasons people
file bankruptcy is to get a
“discharge.” A discharge is a
court order which states that you do not
have to pay most of your debts. Some
debts cannot be discharged. For example,
you cannot discharge debts for:
most taxes; child
support; alimony; most student loans;
court fines and criminal restitution;
and personal injury caused by driving
drunk or under the influence of
drugs.
The discharge only
applies to debts that arose before the
date you filed. Also, if the judge finds
that you received money or property by
fraud, that debt may not be discharged.
(4) http://www.usdoj.gov/ust/
New Changes to
the Bankruptcy Law
Important changes were
made to the bankruptcy law in 2005.
Enacted on October 17, 2005, The
Bankruptcy Abuse Prevention and Consumer
Protection Act was designed for the sole
benefit of the creditor. It makes it
harder for debtors to file for
"fresh start" Chapter 7 and
steers them more toward repayment plan
Chapter 13. Under both plans, the
criteria for filing, processing and
liability is filled with pitfalls, traps
and intentional barriers that some
critics say are designed to intentionally
make debtors fail, nullifying the
bankruptcy proceedings, sending debtors
back to their original starting point
with even more money lost.
This change in the law
was hard fought for by the credit card
companies and other lenders seeking
greater protection from "dead
beats" and "losers" who
were gaming the system.
While no sympathy is
spared to those who did manipulate the
system, the credit card companies are
just as guilty at creating the high rate
of bankruptcies they now enjoy wider
protection from. Over the last 10 years,
credit card interest rates were
deregulated and credit card companies
wasted no time in taking advantage of
consumers with mafia style interest
rates.
However, in 2009, The
Credit Card Accountability,
Responsibility and Disclosure Act (or
Credit CARD Act) of 2009 was signed into
law. This law was created after the 2008
economic crisis as an effort at enacting
new protections for
consumers.includes the most sweeping
changes in how credit cards are marketed,
advertised and managed in decades.
Click here to learn more
about the Key
Elements of the Credit CARD Act of
2009
In this section, let's
take a closer look at how the new 2005
Bankrupty Law works.
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